"I am committed to the restoration of fiscal sustainability," Obama said, "but it is critical that the timing and pace of consolidation in each economy suit the needs of the global economy, the momentum of private sector demand, and national circumstances." The United States is setting budget goals for 2013, for example, but in the interim "will pursue measures to support the recovery in private demand and return the unemployed to work," he wrote.

Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession....But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here [in Germany], where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

....German deficit hawkery [...] has nothing to do with fiscal realism. Instead, it’s about moralizing and posturing....There will, of course, be a price for this posturing. Only part of that price will fall on Germany: German austerity will worsen the crisis in the euro area, making it that much harder for Spain and other troubled economies to recover. Europe’s troubles are also leading to a weak euro, which perversely helps German manufacturing, but also exports the consequences of German austerity to the rest of the world, including the United States.

But German politicians seem determined to prove their strength by imposing suffering — and politicians around the world are following their lead. How bad will it be? Will it really be 1937 all over again? I don’t know. What I do know is that economic policy around the world has taken a major wrong turn, and that the odds of a prolonged slump are rising by the day.

I'm not sure I agree with that last sentence. The odds of a prolonged slump seem to me to be within a hair of 100% right now. I'm really not sure there's anywhere for them to rise to.